Author Archive | Don Luskin

Stocks Look Cheap Historically, But They May Get Cheaper

With stocks at new highs, are prices too high for the value-minded investor to pay? I say no — although if you are a value-minded trader, the answer may be yes. The way I look at stock valuations is by comparing consensus forward earnings to current long-term interest rates. That tells me whether the earnings […]

Republicans: The Party of Big Government?

What should investors do about this month’s elections, in which control of Congress went to the Democratic party for the first time in a dozen years? I suppose the first thing is to say “Thanks” to the guys who got booted from office on Tuesday. Be grateful — it’s been a nice run for investors […]

Creating Unemployment

Her’s a fantastic idea that will make everybody richer. Let’s pass a law setting a minimum price on used cars. How about, say, $15,000? If you’ve got an old beater you want to sell, and you were worried that you’d only get a couple thousand bucks for it, then this law is for you! Now […]

Hands Off My Net

The S&P 500 has more than doubled over the last 10 years — a decade in which the Internet came out of nowhere, and established itself as the technology platform of the new global economy. The Internet has been the greatest engine of economic growth the world has ever seen. Now, for the first time, […]

Maryland Wallops Wal-Mart

If you own stock in Wal-Mart Stores, be afraid — be very afraid. Yes, it wasn’t all that long ago that I was recommending buying shares of the giant retailer. But things have changed. Right after I recommended Wal-Mart last October it rallied by as much as 15%. But now it’s given most of that […]

Stocks Will Shine Again

Two weeks ago I suggested that investors sell Exxon Mobil and use the proceeds to buy Wal-Mart Stores. If you’d made the trade that day, then you’d be ahead 11% overall — Wal-Mart is up 3.6%, and Exxon Mobil is down 7.4%. I imagine most people didn’t follow my advice, and I understand why. It’s […]

Running Out of Gas

There aren’t many iron-clad rules in investing, but there’s one: Bet against anything that the vast majority of investors agree upon. Right now, based on conversations with my clients, who are some of the best and brightest investors on Wall Street, I’m seeing a strong bullish consensus about energy and energy stocks. While I hate […]

Don’t Look a Gift Horse in the Mouth

Alan Greenspan had his “conundrum,” and I’ve got mine. Greenspan’s conundrum: why are long-term interest rates staying so low for so long? Mine is why stock-market volatility is so low despite a global economic background that, on the face of it, is fraught with risk and uncertainty. Volatility is simply a fancy word for the […]

Lessons From the Poker Table

Last month in Las Vegas, 5,619 contestants were vying for the 36th annual World Series of Poker’s No-Limit Texas Hold-’Em Championship. The total prize pool was $52,818,610 — by far the richest purse in the history of sports. Just think about what’s at stake. $7.5 million goes to the first-place winner. Any player who finishes […]

The London Terrorist Attacks and the Stock Market

Why did stocks finish the day higher after Thursday’s tragic terrorist bombings in London? There are several very simple reasons. To begin with, the market wasn’t surprised. Ever since September 11, 2001, markets have been braced for terrorist attacks. London knows as well as any city in the world what it’s like to live with […]

Refining Your Oil Strategy

On Thursday afternoon crude oil futures hit $60 a barrel, and investors hit the panic button. Apparently $59 was fine. $60, for some reason, was a big problem. There’s nothing fundamental about $60 a barrel. There’s no reason to think that the economy will do just fine with $59 oil, but will fall into a […]

Stocks vs. Bonds: Stocks Win

Here are two investments I’d like you to consider. The first is a Treasury bond maturing in 10 years. The second is the Standard & Poor’s 500. Think you already know everything there is to know about them? Think again. Let’s start with the bond. As of Thursday’s close, it was priced to yield 4.07%. […]

The Sky Isn’t Falling

A generation of investors has been converted to the gospel of equities: Stocks may rise or fall over the short term, but over many decades a diversified portfolio will be the ticket to retirement heaven. The chief prophet of this belief has been Wharton professor Jeremy Siegel, and its bible has been his 1994 book, […]

Hedges Are About to Roll

Hedge funds are the new “dumb money.” At least that’s what so many of my institutional clients are telling me. And they should know, considering they’re hedge funds themselves. Don’t get me wrong. My clients are the larger hedge funds that have been around for years, battle-tested in bull markets and bear markets. The ones […]

It’s About Time

The market is full of mysteries. Here we are with the yield on 10-year Treasurys falling below 4%, and everyone’s saying that’s because the bond market is predicting a recession. Yet — Friday’s reversal notwithstanding — stocks have just rallied for the fifth week off their April 20 bottom, with the S&P 500 now up […]

Social Security: There is No Trust Fund, Only IOU’s

On Tuesday, President Bush had the most bizarre cabinet meeting any president is ever going to have. It was a meeting with an actual cabinet. A filing cabinet. A filing cabinet in Parkersburg, W. Va., to be precise. Strange? Yes. But then again this is a very remarkable filing cabinet. By one way of looking […]

Get Ready for Another Strong Year

So what’s not to love about 2004? I admit that it wasn’t easy going, but at this writing it looks like the S&P 500 is going to close out the year at better than three-year highs, with something like an 11% total return. The Russell 2000 Index of small-cap stocks will close at or near […]

Options, Schmoptions

Well, it finally happened. The Financial Accounting Standards Board — the group that determines so-called “generally accepted accounting principles” for financial reporting — has ruled that companies must report the costs of stock options on their income statements. The NASDAQ tumbled yesterday when the news came out, because technology companies are the heaviest issuers of […]

Ownership Has Its Privileges

If you’re reading this column, you’re probably an investor in the stock market. That makes you a member of the approximately 60% of American households that own stocks, either directly or indirectly. That also makes you part of what President Bush likes to call the “ownership society.” But what about the other 40% of households […]

Fear is an Investor’s Best Friend

Fear is an investor’s best friend. Fear makes stocks cheap, so that you can buy them at great prices. But, of course, to dare to do that, you have to be unafraid. It’s a bit of a paradox. Stocks have soared since the climax of fear this summer — a “bubble of fear” created by […]